During our audit period, the District made 19,010 claim payments totaling $197 million. We found that District officials established adequate controls to ensure claims are audited in a timely manner, properly authorized and for legitimate purposes. However, in some instances, purchase orders are not issued prior to ordering goods or services.

We reviewed all the duplicate receipts issued for collections during our audit period to determine if they were recorded in the computerized accounting system and moneys were deposited into the Justice's bank accounts. We reviewed bank reconciliations and accountabilities for each Justice for the audit period and found that the balances in the Justices' accounting records agreed to the amount on deposit in the Justices' bank accounts. In addition, our review of 50 case files (25 cases for each Justice) disclosed that the amounts reported as collected in these files agreed with the duplicate receipts, monthly accountability reports and monthly reports to the Justice Court Fund. Except for minor exceptions which were discussed with Court officials, we found that Court collections were accurately accounted for and deposited into the Justice's bank accounts. We commend the Justices for establishing effective internal controls over Court operations.

Although the District's policy indicates that it has a written online banking agreement with its bank, District officials told us they do not have an agreement with the bank. They also did not adequately segregate online banking duties and did not dedicate a separate computer for online transactions to limit access to online bank accounts. Furthermore, both the Treasurer and Business Manager perform online banking transactions, but neither has received Internet security awareness training.

The Board did not adequately oversee the Village's financial operations by developing clear and adequate policies and procedures, sufficiently segregating financial duties or implementing compensating controls to mitigate the risks. As a result of this weakened control environment, both the Clerk-Treasurer and the Mayor were able to abuse their fiduciary duties. The Clerk-Treasurer was paid for unsubstantiated hours that were often logged while at home on nights and weekends. In addition, she manipulated her leave accrual balances. Further, the Board did not adequately audit claims to ensure that they were for Village purposes. As a result, the Mayor used the Village credit card to make personal purchases of cigarettes, soda and food and submitted mileage and purchase reimbursement claims that were unsupported, false, inaccurate and unfounded, without being detected. The Board also abdicated their fiduciary responsibility by allowing the Clerk-Treasurer to pay claims prior to their audit and did not perform the required annual audit.

The City of Glen Cove, located in Nassau County, issued debt totaling $12.8 million to liquidate various accumulated fund deficits for the fiscal year ending December 31, 2006. New York State Local Finance Law requires all local governments that have been authorized to issue obligations to fund operating deficits to submit their proposed budget for the next fiscal year to the State Comptroller for review while the deficit obligations are outstanding. City officials are projecting operating surpluses for the 2016 fiscal year totaling $990,296 in the general fund and an operating deficit totaling $54,816 in the water fund. The City projects that, as of December 31, 2016, it will have a combined unassigned fund deficit totaling more than $4 million in the general, water, and golf and recreation funds. The City included $3.9 million in revenue in the 2017 proposed budget from the sale of waterfront property and City officials were unable to provide any definitive documentation that the sale will take place during the upcoming year. The City has budgeted $1.9 million for building permit revenues, an increase of $520,536 over the 2016 estimate. This increase is associated with building permit applications that are part of the waterfront property development which may not occur in 2017. The 2017 proposed budget contains no appropriation for the payment of tax certiorari refunds, which have averaged $923,000 over the last five years. City officials told us they intend to use debt to finance tax certiorari settlements. The City's proposed budget complies with the tax levy limit.

We reviewed payroll payments made to 18 employees with combined total gross pay of $80,888 during May 2016 to determine whether salaries and wages were accurately paid. Except for minor deficiencies, which we discussed with District officials, the District's procedures for payroll processing (by the payroll clerk) and payroll review and certification (by the Superintendent) were adequate to ensure that the employees we reviewed were accurately paid at Board-authorized rates. We commend District officials for establishing adequate payroll procedures to ensure that employee payments are accurate.

The Board has not effectively managed the Library's financial condition to adequately safeguard the Library's resources. The Library experienced increasing operating deficits over the last three completed fiscal years of $41,611 in 2012-13, $87,767 in 2013-14 and $174,485 in 2014-15, which was $87,000 more than Library officials planned. This occurred because Library officials spent more than budgeted, primarily for building maintenance, health insurance and personal service costs. In addition, the Board was not monitoring the Library's financial position and did not address these rising costs. As a result, unappropriated fund balance declined from over $224,000 to approximately $42,000, or by about 81 percent, during this period. The Board was unaware of the Library's true financial condition. Prior to March 2015, the Board relied on the Village to handle its fiscal oversight responsibilities. Although the Board received monthly financial reports from the Village Treasurer that included budget-to-actual comparisons of revenues and expenditures, the reports did not include accurate cash or fund balances. As a result, the Board thought the Library had approximately $500,000 available to fund operations. However, at the beginning of January 2015, the Library had approximately $61,000 available and spent almost $67,000 during the course of that month. Because the next significant anticipated revenue was not due until late February, the Village Treasurer recognized the cash shortage to cover operations and made an interfund advance of $100,000 from a capital projects fund to the library fund.

The Board and District officials have not adopted realistic budgets or effectively managed fund balance and have allowed unrestricted fund balance to exceed the statutory limit of 4 percent for the past three fiscal years by amounts ranging from $350,000 to $940,000 or 3.9 to 10.7 percentage points. Although District officials appropriated an average of $430,000 of fund balance each year to help finance the subsequent year's budget, the amount appropriated was not used because the Board and District officials overestimated appropriations by an average of $870,000 or 10 percent each year. When unused appropriated fund balance is added back, unrestricted fund balance exceeded the statutory limit by amounts ranging from $1.4 million to $1.9 million or 12.8 to 17.5 percentage points. Based on the 2015-16 and 2016-17 adopted budgets, these budgeting practices have continued. District officials also misclassified a portion of fund balance as non-spendable, thereby improperly reducing unrestricted fund balance. Despite the significant amount of accumulated fund balance, the Board and District officials continued to raise the tax levy by an average of 2 percent each year or a total of $350,000 over the last three years.

The District's unrestricted fund balance exceeded the statutory maximum from July 1, 2012 through June 30, 2015. In addition, the Board adopted budgets that overestimated expenditures by a total of $9.3 million and underestimated revenues by a total of $2.8 million. Operating surpluses during this period totaled $3.6 million and, therefore, fund balance appropriated by the Board was not used. When considering the unused appropriated fund balance, the District's unrestricted fund balance as of June 30, 2015 was 23 percent of the ensuing year's budget rather than 19 percent that District officials reported. The District also maintained three reserve funds with balances totaling $1.9 million, as of June 30, 2015, and two of them were overfunded. District officials did not use these reserve funds during the audit period but instead used operating funds to pay for related costs. Further, over the same three-year period, the District's tax levy increased from $36 million to $37.7 million (5 percent). Given the excess fund balance and idle reserve funds, the tax levy may have been unnecessarily high.

We selected a sample of 33 vendors who were paid approximately $4.1 million during our audit period and found that District officials generally complied with General Municipal Law bidding requirements for purchases totaling more than $3.3 million from 12 vendors but did not use other competitive methods to procure goods and services from seven vendors who were paid $420,749. These procurements were for professional services and items that were under the bidding thresholds. Our prior audit, which was released in August 2009, recommended that the District amend the procurement policy to include requirements for awarding professional services after soliciting competition, but the District chose not to do so.

The Board established an effective claims auditing process to ensure that claims were properly audited before payment and supported by adequate documentation, that the goods and services were received and that the claims were for proper Town purposes. We commend Town officials for establishing and implementing appropriate procedures for auditing claims.

The Library System's purchasing policy needs to be improved because it does not address what internal procedures to use for purchases that do not require competitive bidding. As a result, Library System personnel do not have adequate guidance when making purchases on behalf of the member public libraries. We examined all purchases, totaling $372,348, made by the Library System on behalf of its member public libraries during our audit period. Most purchases were made in accordance with General Municipal Law. However, the Library System does not verify that vendor quotes are in agreement with the State contract prior to ordering. Consequently, minor errors in pricing occurred. The Library System made 33 purchases totaling $56,146 for computers and computer related equipment. Except for the minor discrepancies, which we discussed with Library System officials, all the computer and computer related equipment purchases were made using State contract pricing. Because the Library System does not verify State contract pricing, there is a risk that it may not get the best possible price when making purchases for member libraries.

Based on the results of our review, we found that the significant revenue and expenditure projections in the tentative budget are reasonable. We also found that District officials generally implemented the recommendations in our prior budget review letter issued in April 2015.

BOCES officials need to improve controls to adequately secure and protect IT systems. Four employees had unauthorized personal Internet usage, which included accessing websites for shopping, personal email, social networking, travel and entertainment. Also, nine employees had more access rights than necessary for their job duties. Furthermore, the rooms housing the servers and IT infrastructure did not have safeguards to track access and protect IT assets, and BOCES officials have not developed a disaster recovery plan to guide action in the event of a disaster. Additionally, the Board appointed a claims auditor but needs to improve its oversight of the claims auditing function. There was no evidence that 33 claims totaling $100,873 were checked to ensure they did not exceed their related purchase orders or that 13 claims totaling $42,526 agreed with approval contracts or agreements. In addition, two claims totaling $26,675 were not mathematically accurate, three claims totaling $14,250 were not itemized and five claims totaling $12,672 were paid without proper approval. Additionally, the claims auditor did not submit adequate claims audit reports to the Board each month that included discovered conditions.

Company officials need to improve controls to ensure that financial activity is properly recorded and reported and that Company money is safeguarded. Company officials did not establish adequate controls or provide sufficient oversight of the Company's financial activities. Consequently, the Company's accounting records were not properly maintained, bank reconciliations were not prepared and crucial financial reports were inaccurate or not prepared and submitted to Company officials or to the Office of the State Comptroller. In addition, duplicate press-numbered receipts were not issued to provide supporting documentation for the funds collected during our audit period and checks received totaling $21,181 were not deposited in a timely manner. The Company required that all checks be signed by two Company officers. However, the Treasurer was able to bypass this control and disburse checks at any time because the President and Chief periodically both signed a series of blank checks for the Treasurer to use for Company disbursements. Of the 122 check disbursements totaling $68,487 that were disbursed during our audit period, Company officials did not approve 114 disbursements (93 percent) totaling $64,830 before the payments were disbursed as required by the constitution. In addition, 65 disbursements (53 percent) totaling $24,256 were not supported by adequate documentation and 31 disbursements (25 percent) totaling $10,568 were gifts to individuals or donations made on the Company's behalf. However, because the constitution did not specify the types of expenses authorized to be paid with Company funds, the Company did not have sufficient guidance for disbursements that were made for non-fire protection purposes.

The City incurred operating deficits in fiscal years 2012 through 2015 totaling $2.8 million. As a result, general fund balance decreased by approximately 58 percent, from $4.8 million to $2 million. The City's financial condition has deteriorated over the past four years because City officials have adopted budgets that were not structurally balanced. In addition, the Mayor, Council and Director did not properly budget for, and the Mayor did not ensure that the Comptroller properly accounted for, health care expenditures. The City's financial condition will continue to decline during 2016 because the adopted budget is again not structurally balanced. We estimate that the City will likely incur an operating deficit of at least $400,000 unless significant and immediate spending changes are implemented. As a result, the City will have less than $800,000 in spendable fund balance remaining as of December 31, 2016. We also estimate that the City will have minimal cash at the end of 2016 and will likely be experiencing cash flow problems as a result. We also reviewed the 2017 preliminary budget estimates and determined that the City is likely to have a budget gap of more than $2 million. City officials will have to take meaningful steps to reduce expenditures or obtain additional revenues. Despite the City's deteriorating financial condition, City officials have not developed a multiyear financial plan that would aid in planning and managing the City's finances and operations, nor have officials developed a multiyear capital plan.

The Board did not always enforce its policies and procedures. Although the Board is required to approve all budget transfers above $25,000, the Chief Financial Officer approves these transfers. We reviewed 30 budget transfers totaling $9.2 million and found that 24 totaling $7.8 million were not presented to the Board for approval. The Board approved the remaining six budget transfers totaling $1.4 million between 18 and 70 days after the transfer was processed. The Board's ability to monitor the budget and ensure that account codes are not overspent is compromised when it does not approve budget transfers. Additionally, BOCES officials are making excessive use of miscellaneous budget codes for expenditures. Expenditures totaling $2.3 million were coded to miscellaneous budget codes during the 2014-15 fiscal year. This reduces the transparency of BOCES operations. BOCES officials are also not ensuring that all employees are adhering to the established purchasing policy and procedures. Employees purchased goods and services totaling $13,700 from six vendors before preparing purchase orders to be approved by the purchasing department. The purchasing department is not adequately tracking the occurrence of confirming purchase orders by notifying employees of their lack of adherence to the established policy.

The Board did not ensure that adequate accounting records and reports were maintained and did not effectively monitor the District's financial operations. The Clerk did not maintain accurate and complete accounting records and the Treasurer did not provide the Board with adequate periodic reports. Furthermore, we recalculated the District's assets, liabilities and fund balance and found unrestricted fund balance deficits for the 2013-14 and 2014-15 fiscal years and budgetary deficits for the 2013-14, 2014-15 and 2015-16 fiscal years. Additionally, the District incurred a cash flow shortage that precluded employees from cashing their paychecks from July 2013 to September 2013. In 2014, the District liquidated two certificates of deposit containing reserve funds and transferred those moneys to the general fund checking account. If the District had not made these transfers, the District would have also experienced cash flow shortages in 2014 and 2015.

The Board needs to improve its internal controls over water rents to ensure that they are accurately billed and collected and ad valorem assessments are properly levied. We found that internal controls over water rents and assessments were inadequate and oversight is lacking. Because Town officials were uncertain of District boundaries, ad valorem assessments were not levied on all properties in the District. As a result, assessments charged to District property owners were higher than necessary. We also identified 79 properties in the District that were paying ad valorem assessments but were not billed water rents. As a result, the Town may have lost as much as $31,850 in revenue during our audit period. In addition, 41 customers who were charged the minimum quarterly water rent may actually be using more water than the amount billed for minimum use. We also found that some meters were broken and had not been operating or repaired since March 2011. As a result, the Town may be losing revenue by not knowing the actual amount of water used by customers with broken meters. Finally, the Board did not establish procedures to provide guidance to the clerk, or adequately segregate the clerk's duties. As a result, customers were billed incorrectly or not billed at all.

The Board implemented adequate procedures over cash receipts and disbursements. Cash receipts were all deposited in District accounts, and disbursements were adequately supported and for valid District purposes. Except for minor discrepancies that we discussed with District officials, all checks were adequately supported, properly authorized and for valid District purposes. We commend District officials for designing and implementing an effective set of controls over cash receipts and disbursements.